Labor regulations and European venture capital

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Title: Labor regulations and European venture capital
Author: Bozkaya, Ant ; Kerr, William R.
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
Series number: 30/2013
Year of publication: 2013
Publication date: 9.12.2013
Published in: Published in Journal of Economics and Management Strategy, Volume 23, Issue 4, 1 December 2014: 776-810
Pages: 50 s.
Keywords: Eurooppa; riskirahoitus; sääntely; työmarkkinat; työttömyysturva; työvoimakustannukset; yrittäjät; yritykset; investoinnit;
JEL: G24; J21; J65; L26; M13; O31; O32; O52
Abstract: European nations substitute between employment protection regulations and labor market expenditures (e.g., unemployment insurance benefits) for providing worker insurance. Employment regulations more directly tax firms making frequent labor adjustments than other labor market insurance mechanisms. Venture capital investors are especially sensitive to these labor adjustment costs. Nations favoring labor market expenditures as the mechanism for providing worker insurance developed stronger venture capital markets over 1990-2008, especially in high volatility sectors. In this context, policy mechanisms are more important than the overall level of worker insurance. JEL Classification: G24, J21, J65, L26, M13, O31, O32, O52. Key Words: employment protection regulations, dismissal costs, unemployment insurance benefits, private equity, venture capital, entrepreneurship.

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